What the Final Tax Bill Means for Estate and Gift Tax Planning

The Tax Cuts and Jobs Act, which President Donald Trump signed into law on December 22, 2017, represents the most significant change to the U.S. Tax Code in more than three decades. Among the changes is an increase of the federal estate, gift and generation-skipping transfer tax exemption limits for the years 2018 through 2025.

Starting in 2018, the federal estate exemption will rise from $5.49 million per person in 2017 to $11.2 million per person ($22.4 million per couple), and will continue to be adjusted annually for inflation. This means individuals and couples may transfer more than twice the amount of assets as they could have in 2017 without estate, gift and generation-skipping transfer tax implications.

Note, the new law does not affect the annual gift tax exclusion amount. That amount will be increased for inflation from $14,000 per person currently, to $15,000 per person in 2018.

Note further that the new law does not have any effect on the New York State estate tax exemption amount. The New York estate tax is based on the federal estate tax as it existed on January 1, 2014. Changes after January 1, 2014 are not automatically incorporated into the New York estate tax. The current threshold for the New York estate tax is $5,250,000. It remains to be seen whether (and how) the Legislature reacts to the various changes in the Act that have implications for New York tax.

As the increased exemption is set to expire at the end 2025 and revert back to pre-2018 levels without further Congressional action, now is the perfect time to review and update your estate planning documents so that you can take advantage of planning opportunities to utilize the increased exemption.